MANILA, Philippines - Despite lingering financial volatility, economic growth could have accelerated in the third quarter from the previous six months on the back of sustained domestic demand, Budget Secretary Florencio Abad said.
“I can say with confidence that third quarter growth will be better than first half growth,” Abad told The STAR in a text message yesterday.
Economic growth – as measured by gross domestic product (GDP) – slowed to 5.3 percent in the first semester even after it picked up to 5.6 percent in the second quarter from five percent in the first three months.
Abad, the chairman of the interagency Development Budget Coordinating Committee (DBCC), earlier said the government is sticking to its seven to eight percent growth goal this year even as he admitted reaching it is a “challenge.”
The third-quarter GDP data will be reported next month.
Asked what could have driven the July-September growth, Abad particularly cited stronger government spending during the period. Treasury data showed state expenditures rose nine percent year-on-year in the first half.
This paled in comparison with an average of 20-percent expansion in July and August. The fiscal performance for September has yet to be released.
Private spending could have also contributed, Abad said, pointing to traditional drivers of overseas Filipino remittances and receipts from business process outsourcing (BPO) industry.
From January to August, remittances grew 4.01 percent to P16.21 billion, central bank data showed. Large dollar inflows and BPO earnings give Filipino families more money to spend and invest, helping boost growth.
On the flip side, Abad said exports and imports, which are also “significant drivers” of GDP, likely dragged growth. For the first eight months, exports were down 4.4 percent, while imports inched up 0.1 percent as of July.
“I’m not too sure how these sub-sectors performed in the context of global slowdown and uncertainties, but with a low inflation regime…, third quarter still should be better than the first half,” the budget chief explained.
Earlier, Abad said economic managers are no longer meeting this year to review macroeconomic targets and would likely wait until full-year growth data is available.
Budget Undersecretary Laura Pascua said yesterday preparations have “not yet” been made for a DBCC meeting. Pascua is the chair of the Executive Technical Board, which recommends targets to DBCC.
When asked what could be ETB’s recommendations, Pascua said in a separate text message: “We have not seen the technical working group recommendations yet.”